HDFC Bank Limited (NSE:HDFCBANK) Q1 FY23 Earnings Concall dated Jul. 16, 2022
Corporate Participants:
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Analysts:
Mahrukh Adajania — Edelweiss — Analyst
Hardik Shah — Goldman Sachs — Analyst
Kunal Shah — ICICI Securities — Analyst
Adarsh Parasrampuria — CLSA — Analyst
Abhishek Murarka — HSBC — Analyst
Presentation:
Operator
Ladies and gentlemen, good evening, and welcome to HDFC Bank Limited Q1 FY ’23 Earnings Conference Call on the financial results presented by the management of HDFC Bank. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after a brief commentary by the management. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, thank you, Faizen. I appreciate. Good evening, and a warm welcome to all the participants. We can get started which provides the context on the environment that we operated in the quarter, so that gives the backdrop of what was going on. Much of this quarter has been about inflation and price surges as you know. Energy and fuel have been at the center, supply chains have been disrupted, which created a major demand and supply gap. As we progress further in the year we will keep a careful watch on the development. We see opportunities in the marketplace in the current environment supported by dynamic fiscal and monetary policy.
Activity indicators released during April to June quarter indicates that economic activity continues to hold up well despite global risks. GST collections, manufacturing, PMI, IIP, credit, rail freight services, PMI, et cetera, et cetera show robustness and opportunities in the economy. The RBI raised the policy rate by 90 basis points in the quarter, taking the repo rate to 4.9. The Monetary Policy Committee also voted to remain focused on withdrawal of accommodation in a calibrated fashion to ensure inflation remains within the RBI’s upper band, while supporting growth. Accordingly, they have responded with appropriate lending rate increases.
Well, let’s start — let’s go through — let’s talk about the five themes at a high level now. On the distribution expansion, that’s the first thing, we added 36 branches during the quarter and 250 more are in various stages of readiness to be rolled out. We have 15,618 business correspondents, an increase of 277 over prior quarter. Gold loans are now processed at just over 2,000 branches as against 1,340 branches in the prior quarter. It is well on the way to be a product offering in most of our branches. Payment acceptance points have grown to 3.2 million, a year-on-year growth of 42%. Wealth management is now offered in 357 locations through hub-and-spoke model. We have expanded 141 new locations in the quarter. This is in accordance with our plan to take this to deeper geographies in over 900 locations in the current financial year. In commercial and rural banking, SME is now offered in 640 districts in our drive to expand the SME market share.
Next, let’s talk about a few comments on the customer franchise building. During the quarter we added 10,900 plus people and 29,000 people over the year, over the past 12 months. Our people have acquired 2.6 million new liability relationships in the quarter, exhibiting a phenomenal growth of 59% over the same time last year and 10% over prior quarter. They’ve also acquired 1.9 lakh MSE accounts in the quarter. On cards, we have issued 1.2 million new cards during the quarter, highest ever with a 47% growth over prior quarter. Total cards — cards base now stand at 17.6 million.
Moving on to next, our focus on the granular deposits. Deposits at INR16,04,000 crores, increased by approximately INR46,000 crores in the quarter as against an addition of approximately INR11,000 crores in last year’s June quarter. Deposits reflected a year-on-year growth of 19.2%. Retail deposits increased by approximately INR50,000 crores in the quarter, up 19% year-on-year and 3.9% sequentially. CASA deposits recorded a strong growth of 20% year on year, ending the quarter at INR7,34,000 crores with a CASA ratio of 45.8%. Term deposit grew by 18.5% year-on-year, ending the quarter at INR8,70,000 crores.
Next, moving on to advances, total advances were INR13,95,000 crores. Gross of sell downs, we grew 22.5% year-on-year. Our retail advances growth continued during the quarter as well. Retail advances grew 21.7% year-on-year and 4.9% quarter on quarter. Excluding auto, and also two-wheeler, loans which faced supply chain disruptions during the quarter, the year-on-year retail growth excluding these two were 25%. Card spends have grown by 24% over prior quarter. Payment business, advances payment loans has grown 27% over prior year and 4.4% over prior quarter. The bank has a market share of 22.4% in cards, 48.9% in card receivables, 27.7% in card spends and 47% in merchant acquiring volumes.
Commercial and rural banking, which drives our MSME and PSL book, continued its momentum with a year-on-year growth of 28.9%. In the wholesale segment with the rate dislocation, we let go assets aggregating to INR40,000 crores to INR50,000 crores. Despite that the book grew 15.7% year-on-year. And lastly on technology and digital, as promised, the bank commenced digital launches to enable smooth customer experience. MyCards, which is a microservices architecture that is stateless and deployed on cloud, making it highly scalable. This has emerged as a preferred service tool for our customers with a simplified login and self-service features. We now have over 2 million registered card users, a growth of 1 million over prior quarter. We had 33 million customer service addressed digitally during the quarter on this platform. This microservices architecture design principle derisks and removes clutter on our digital platform and enhances customer service.
Xpress auto loans is an end-to-end digital service which enables instant and hassle-free car loan disbursals for existing and new to bank customers. 60% of our loan decisioning through this service are processed in less than five minutes with disbursals taking less than 30 minutes. Within a month of launch, Xpress auto loans volumes has already reached more than 5% of our new car loan volume. HDFC Bank One [Phonetic], our customer experience hub has been launched recently on multiple channels; e-mail, social care, SMS and WhatsApp, and enhances our customer relationship management using AI-ML and conversational bots, enabling round the clock self-service capabilities akin to human interaction.
We are continuously adding features to our SmartHub Vyapar app and see a significant increase in its adoption across our customer base. We now have more than 1.15 million customers since its launch onboarded on this platform. In Q2, that is the current running quarter, July to September, we are poised to launch further digital initiatives such as PayZapp 2.0, customer onboarding journeys across most products such as SDPL, balance transfer EMI, et cetera, implementing customer experience hub across additional service and sales channels such as phone banking and telechannel — telesales. For enhanced customer service and relationship management, we will continue to work on developing applications for Q3 implementation. For instance, Voice App, revamping net banking, revamping corporate net banking and launch of new mobile banking app in Q4.
In Q1, we received a total of 231 million visits on our website, averaging 28-plus million unique customers per month, which is a year-on-year growth of about 20%. Business growth continued to gain momentum across diverse products and segments, driven through relationship management and enhanced digital offering. Balance sheet remains resilient. Average LCR for the quarter was at 108% and was at 120% as of June quarter-end. Capital adequacy ratio is at 18.1% with CET1 at 16.5%, including profits for the current quarter.
Let’s start with net revenues. Core net revenues were at INR27,181 crore, excluding trading and mark-to-market losses, which grew by 19.8% over prior year and 2.4% over prior quarter, driven by advances growth of 22.5%, deposit growth of 19.2% and total balance sheet growth of 20.3%. Net interest income for the quarter at INR19,481 crore, grew by 14.5% over prior year and 3.2% over prior quarter. The core net interest margin was at 4.0% [Phonetic]. Based on interest earning assets, the net interest margin was at 4.2%.
Moving on to details of other income, first, fees and commission income was at INR5,360 crore and grew by 38% over prior year and were lower 4.8% over prior quarter after seasonally strong fourth quarter. Retail constitutes approximately 92% of fees. FX and derivatives income at INR1,259 crore, was higher by 5% compared to prior year. Trading and mark-to-market losses were INR1,312 crore, primarily owing to spike in benchmark bond yields witnessed during the quarter. The mark-to-market losses come from our AFS, HFT and Government of India Securities, corporate bonds and pass-through certificates. Prior quarter was a negative INR40 crores and prior year was a gain of INR600 crores. Other miscellaneous income of INR1,080 crores, includes recoveries from written-off accounts and dividends from subsidiaries. Excluding trading and mark-to-market losses, total other income at INR7,700 crores, grew by 35% over prior year.
Operating expenses for the quarter were at INR10,502 crores, an increase of 28.7% over prior year, due to a low base of prior year COVID Wave 2 impacted quarter and increased by 3.4% over prior quarter. We added 725 branches and 2,329 ATMs since last year, taking the total network strength to 6,378 branches, 18,620 ATMs and 15,294 business correspondents managed by Common Service Centers. Core cost-to-income ratio for the quarter, excluding trading and mark-to-market losses was at 38.6%.
Moving on to PPOP, our earnings trajectory improved with continued retail growth. Our core PPOP grew 14.7% year-on-year and 1.7% sequentially. Our pre-provision operating profit was at INR15,368. Coming to asset quality, the GNPA ratio was at 1.2%, as compared to 1.4% prior year. Out of the 1.28%, about 18 basis points of standard, thus the core GNPA ratio is 1.1%. However, these are included by us in NPAs, one of the other facility of the borrower is an NPA. But we’ll talk about 1.28%, we’ll have to anchor with that.
As you’ve seen in the past several years, agricultural segment has a seasonal impact in June and December cycle. GNPA ratio, excluding NPAs in agricultural segment and a one-off was at 1.03%, prior year was at 1.26% and prior quarter was at 1.01%. Net NPA ratio was at 0.35%, prior year was at 0.48% and preceding quarter was at 0.32%. The slippage ratio for the current quarter is at 0.5% to INR7,200 crore. Excluding the seasonal agri and one-off slippage, the slippage in the current quarter was approximately 38 basis points, call it 0.4%.
During the quarter, recoveries and upgrades were approximately INR3,000 crores or 22 basis points. Write-offs in the quarter were INR2,400 crores or approximately 17 basis points. There were no sale of stressed or written-off accounts in the sector. The check bounce rates across the products in June continues to remain lower than the pre-COVID levels for almost all of the retail products. The restructuring under the RBI Resolution Framework for COVID-19 as of June-end stands at 76 basis points, INR10,750 crores. In addition, certain facilities of the same borrower, which have not restructured is approximately 13 basis points or INR1,850 crores, that totals to 89 basis points.
Provisions reported were around INR3,200 crore as against INR4,800 crore for the prior year and INR3,300 crores during the prior quarter. The provision coverage ratio was at 73%. There are no technical write-offs. Our head office and branch books are fully integrated. At the end of current quarter, contingent provisions and floating provisions remained close to prior quarter at INR11,100 crores. General provisions were INR6,500 crores. Total provisions comprising specific floating contingent and general provisions were about 170% of gross nonperforming loans. This is in addition to the securities held as collateral in several of the cases. Floating contingent and general provisions were about 1.25% of gross advances as of June quarter-end.
Now coming to credit cost ratios, the total annualized credit cost for the quarter was at 91 basis points, prior year was at 167 basis points, prior quarter was at 96 basis points. Recoveries, which are recorded as miscellaneous income amount to 23 basis points of gross advances for the quarter as against 14 basis points in prior year and 26 basis points for prior quarter. Total credit cost ratio net of recoveries was at 68 basis points compared to 1.53% in prior year and 70 basis points in prior quarter. The reported PBT at INR12,180 crore grew by 18% over prior year. Net profit after tax for the quarter at INR9,196 crores after factoring in the trading and mark-to-market losses of INR1,312 crore in the quarter grew by 19% over prior year. That is after taking the charge for INR1,112 crore, grew by 19%.
Now on some highlights on HDBFS on an IndAS basis. HDBFS has opened 29 branches in the quarter, taking it to 1,403 branches spread across a little more than 1,000 cities, 1,008 cities and towns. Branch addition continues to supplement the digital investments. Customer base grew to 9.8 million with 7.7% additions during the quarter at an increase of 35% over prior year. The uptick in disbursements in March quarter was sustained in the quarter ended June ’22 at INR9,000 crores, though disbursement in Q1 are traditionally lower as compared to March quarter. This disbursement reflect a growth of 130% year-on-year. The total loan book as on June-end stood at INR61,814 crores, secured loans comprising 76% of the total loan book. Net revenue for the quarter ended June 30 was at INR2,194 crores, growth of 13% over prior year and 2.4% sequentially. Cost to net income for the lending business was at 37%.
Provisions and contingencies for the quarter were at INR398 crores as against INR422 crores for prior quarter and INR870 crores for quarter ended last year same time. Stage 3, as of June-end stood at 4.95% after factoring in 1.18% impact of new RBI guidelines issued in November, reflecting sustained healthy collections. The PCR on secured and unsecured book stood at 48% and 92%, respectively. Profit after tax for the quarter ended June was INR441 crore as against INR89 crore for last year same period.
Earnings per share was INR5.58 and book value per share was at INR125. The company remains well capitalized with a capital adequacy ratio of 20% and well positioned to sustain improvement in disbursements across segments and growth. HSL, HDFC Securities Limited has a wide network of 216 branches of 147 cities and towns in the country. HSL has increased its overall client base to 3.99 million customers as of June-end, an increase of 41% over prior year. The total reported revenue for the quarter was at INR432 crore as against INR456 crore in period prior year. Net profit after tax was at INR189 crores against INR251 crores for prior year. Earnings per share in the quarter was INR119.5 and book value per share was at INR1,061.
In summary, over 152,000 employees across the bank dedicated their tireless service to focus on customer engagement, product delivery and service, providing highest standards of banking experience, which results in the quarter’s number of advances growth of 22%, deposits growth of 19%, core operating profit excluding the bond losses of 14.7%, delivering a consistent profit after tax growth of 19% after factoring in the bond losses of INR1,312 crores that I alluded to earlier. Again from a return on asset point of view, 1.8%. Excluding the impact of the trading and mark-to-market, it’s slightly over 2% with an ROE of 17%. Earnings per share reported in the quarter is at INR16.6, book value per share increased in the quarter to INR450.6.
With that, can I request Faizen to open up the line for questions please.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.
Mahrukh Adajania — Edelweiss — Analyst
Hello, sir. Sir, my first question — hello?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Yes. Can you hear me?
Mahrukh Adajania — Edelweiss — Analyst
Yes, sir. Yes.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, go ahead.
Mahrukh Adajania — Edelweiss — Analyst
My first question is on your CRB loans, of course, the Q-o-Q growth, excluding agri, has been good at 4%. However, we’ve been talking about doubling the book in three years. So, that would probably require a higher run rate of growth. So, how do you see the outlook panning out for growth in CRB? And also, if you could throw some color on — you said that you probably gave up some corporate loan growth in the commentary. So, what was that about? That’s my first question. Then I have two more.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. First, let’s talk about the CRB loans that we talked about. The CRB loans had a robust growth of, call it, 28%, 29% year-on-year in the quarter. And we do have aggressive plans across various segments in CRB, both on the MSME side as well as on the agri side, on both sides of that area we’ve got significant plan to grow. This growth — I think we talked about this maybe a month ago in another forum that that growth is predicated on, one, geographic expansion, we want to be present in more districts in the country to be able to capture the supply chain and the distribution chain flows. That’s part of what we are trying to do, to be present everywhere so that we capture all of the distribution chain, supply chain, not just a part of it that we work with various other wholesale clients. We’re able to capture in wholesome, not part. So, that is part of what we are doing.
The second aspect of that is also in terms of agri. Again, typical distribution expansion, moving from about 1 lakh villages that we did today, as I said, we want to go to close to 2 lakh villages. That’s again part of how we want to operate and get to — there are enough opportunities. We see that they’re good and that can come only by where we group our salespeople. We put our relationship people in the local place where the customer is. That is part of the distribution. The second thing is the relationship management, which is in addition to having a physical, we also want to have our relationship now because most of the CRB is about relationship management. And we are expanding more — adding more people into that so that we could get the right kind of relationship to have that — both from acquiring customers as well as broad-basing the product that we could deliver to them.
Yes, we are confident that that segment is poised for growth. And again, we’re not talking about it in isolation. This is going to ride on the country’s macro growth. That means we need the tailwind of the country growth also to be going up and the MSME being almost a third of the GDP participation. That is where we tend to — we are focused on doing that. And from a market penetration point of view, again, I think we told you how that growth is going to come from last time somewhere we talk, which is, we have only about 20% to 25% penetrated in the banking system itself. Also, the rest of them are outside of the banking system. They need to move in here. And this is part of our, both physical as well as the RM expansion strategy is to capture them and bring them into the banking system.
On the CBG — on the wholesale loans, you alluded to something, which I didn’t get. What was the the question on the wholesale?
Mahrukh Adajania — Edelweiss — Analyst
No, you said that you know, INR40,000 crore to INR50,000 crore is or maybe I heard it wrong, you said INR40,000 crore to INR50,000 crore was given up because of competitive rates or something like that.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Very good — good point. Yes, I did, I did mention that and I specifically that, so that I know that you will pick it up and ask, which is I think there was rate dislocation in the quarter, sometime around starting May, when the rate started to move up, it was a rate dislocation. Immediately after our bank and also others started to move up on the rates and we did that.
And as we move up on the rate, there were some customers who had offered lower rates by certain other market participants and we do not want to cut back on our rates to keep them. We said that’s fine, because we do have a relationship. We do continue to have relationship with those customers, the INR40,000 crore, INR50,000 crore who went and took, we continue to have except that we didn’t endeavor by price to keep increasing those shares. So, we said that’s fine to let go, so let somebody else can take it at a lower price than where we do and that is what I alluded to.
Mahrukh Adajania — Edelweiss — Analyst
Okay. And sir, was that PSU banks or private banks?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Broadly, it was across everywhere. So, like — I’m not going into the details, but across the landscape.
Mahrukh Adajania — Edelweiss — Analyst
Okay. Okay. And sir, can you please quantify the slippage figure as in the absolute amount, if you can?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
I think, I have that INR7,200 crore or something I just mentioned that. Yes, that’s the 50 basis points or 0.5%.
Mahrukh Adajania — Edelweiss — Analyst
Got it. And sir, how much of that would be from restructured?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
I didn’t give that. But I can — I alluded to that slippage amount has got — agri and wholesale one-off, which contributed almost to little more than 10 basis points, so net of that it was 0.4 or 38 basis points, I alluded to. Some of them, not the agri piece, but the other piece is part of the restructuring.
Mahrukh Adajania — Edelweiss — Analyst
Got it, sir. Sir, and my last question is on merger dispensation. So, we did see a press release on RBI approving the merger and it said with terms and conditions. So, were there any dispensations and if not, when would one hear about dispensations applied for and also any clarity on HDFC Life stake?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Two things you asked, one is about the conditions of the dispensation. The no objection from RBI is on our application and — but the conditions, I think we mentioned somewhere, these conditions are, for example, I have to give you some nature right of some of those things how we can think about. When the merger happens, the banking regulation shall apply across all the portfolios and all the business lines. So, that’s part of — those are kind of giving you flavor of some of those conditions, that’s one. And there are some entities that would emerge and the licenses of those entities that would merge, so they have to be surrendered and then intimated to RBI. So, that kind of — those are some examples.
And then when we apply and get approvals from various other authorities, we need to take those approvals to get back through the regulator with those approvals. And when we go to shareholders, whatever is the shareholder resolution and the approvals, we get it back to be to the regulator, so you can see that these are some — I’ll give you some flavor of how to think about this condition. But you alluded to what about the dispensation or the glidepath of the forbearance. So that’s not, that’s not what is, that is something separate. And that is handled as an item — different from the application per se. And we continue to work with the regulators on that aspect.
Mahrukh Adajania — Edelweiss — Analyst
Got it, got it, sir. Sir, my last question is on EBLR repricing. So basically, your reset for retail and corporate loans will be what three months, one month?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Three months or six months, mostly I think it is three months.
Mahrukh Adajania — Edelweiss — Analyst
Got it, sir. Sir, that was very, very helpful. Thank you so much.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Thank you, Mahrukh for asking these.
Operator
Thank you. The next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead.
Hardik Shah — Goldman Sachs — Analyst
Hi, sir, congratulations for a good quarter. My first question is on the MTM loss. Can you share some color on AFS mix, modified duration and under what circumstances one can use the IFR?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, Hardik. Thank you. Thank you for bringing this up. The AFS book broadly you can think about with three components — with broadly three components. One is the corporate bonds. The other is the participation certificate, primarily priority sector lending participation certificates. And the third one is the Government of India Securities. These are three broad components, which are there. Most of these — the other aspect that you asked about this modified duration and how you think about it, see about — for two years, you can think about it as the tenure of the duration and that’s the time it takes to pull this to par. So, from that sense, we expect that in a couple of years, we drift back over this time period.
The other aspect of the investment fluctuation reserve and what it means to these things. See investment fluctuation reserve is an appropriation of profit to set some reserves up. And we have investment fluctuations reserves, which are slightly more than 2% and at the discretion of the bank at some point in time, we can utilize this, but we have not chosen to utilize investment fluctuation reserves and — because it’s slightly more than 2%. It has to be, I think regularly 2%. So, there is no point in looking in. And given that this pulls back to par in a couple of years time, and we are quite not comfortable pulls down the reserves and use it right now.
Hardik Shah — Goldman Sachs — Analyst
Got it. Thank you, sir. My second question is on the growth side, growth on retail has been impressive. So, what are your thoughts on its sustainability given the inflation concerns that you alluded to at the start of the call?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Again, another good point. Thank you. See the retail growth ever since we came back with the credit policy getting back to pre-COVID levels, if you see over a period of two, three quarters having quite good, the December quarter was close to 5%, 4.5%, 5%, the March quarter was close to 5%, similar rate and the June quarter is 5% sequential. So, year-on-year has now crossed the 20% mark, the year-on-year — because off the base, because we kept going down and now we’re starting to build up, sequential momentum is there.
Within the retail book, if you look at the one I called out for, the vehicle segment has been hampered by various supply chain issues. Despite that it did grow well. It did have a quite a good growth. But then if you put that to the side and give more time for that growth, the retail excluding that vehicle segment grew by almost 25% year-on-year. So, this again is a solid growth. Then the other aspect of how to think about the environment and the growth, we do see good amount of demand across most products, from unsecured product to secured product, mortgage product to home loans and across everywhere, you can see that including the gold loan and so on. I think we’ve published that list of various products and the growth rate. So, you can see that it’s balanced across.
Card loans, let’s talk about credit cards, the last, I do want to mention. The card loans growth have very good spend, I think 24% or so sequential spend increase. Again discretionary, if we look at the discretionary spends have gone up even more, most. This growth in the card spend is driven a lot by discretion and discretion, you can take it as also seasonal in the summer months, holidays months, a lot of travel, entertainment, hotels and so on and so forth. They are all coming back to life and you’re seeing pickup — huge pickup on that.
The second aspect of the spend is that it’s a spend translating into loans and which to some extent it is, but to a large extent it still needs to come more. It is still not fully there. From a loan growth point of view, it will take some more time I think over prior year, what the prior quarter, sequential, 4.4% is the sequential growth rate in payment products. For it to pick up and go further, we’ll have to wait for people to utilize their credit lines fully. Still the credit line utilization on cars is at, call it 70% to 80% of the pre-COVID level. So, a lot of credit lines utilizations is still left to go. And the liquidity in hands of the customers is also there. These customers from a relationship point of view, about 5 times our customers have for the INR80,000 crores of payment balances, payment business balances that we have, 5 times that we have liabilities for similar customer segments. So, we need to see that people have good amount to — of money and line utilization to happen. So, we expect that with a pickup that is taking place right now, we need to give some more time for them to do.
Similarly on the revolver rates, you didn’t ask, but I’m sure another person would be thinking about asking, so, I would allude to the same thing. The revolver rate pickup also has not happened yet. First spend that needs to happen, which is happening now, two, three quarters we have seen spend happening. Spend translating into loans, slightly picking up sequential 4.4% picking up. Then the next thing is that the line utilization happens and then comes the revolving to come with that. So, some — we are a few quarters away before it gets there.
Hardik Shah — Goldman Sachs — Analyst
Got it. As a follow-up to that, sir, what are your thoughts on the sustainable revolve rate going forward in the industry?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
As the economy starts to pick up and people spend, which you are beginning to see, discretionary spends you are seeing that happening, once the discretionary spend happen, you will see that people will get back to the previous. Over a period of two years, both, either in our bank or in some other bank, people who were, call it, for lack of some other word, chronic revolvers, that means habitually revolving for more than six months, nine months out of the 12 months have come down because either they are having a bad score in the bureau or they are having a bad score with us and they have utilized their limit.
So, we are not — we have tightened on the limits and not given because we want to be cautious. So, we need to wait for things to come back and then they will start to spend and the revolver is on. We are quite confident that the customer base that we have and the type of spend with the group, we will get back to what we have seen pre-COVID from the spend habits and revolve kind of attitude on that.
Hardik Shah — Goldman Sachs — Analyst
Got it, got it. Sir, last question on deposit rates. You’ve been taking the rates higher, so how should we think about this in the next few quarters as how much hike the bank would consider taking? And how is the competitive intensity increasing on that front?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
The pricing, we are talking about more the time deposit pricing because the other cards, of course my savings account is, has been stable. The time deposits we have slightly only increased over the last month, two months and have taken it up all way what has happened. And the way we think about the pricing is there are two elements to it. One, customers are able to get to the right kind of a customer to have the deposits and what is the price sensitivity of the customer to get those volumes. So, that’s always a kind of what we do, engaging with the front-line who in turn engages with the customer. We get that intelligence and discuss in ALCO, how we are able to get those volumes at what kind of price point that we can get.
And the second aspect of our determination of the price is also competitively priced. Competitively pricing means looking at certain other bands to say that we are relevant in the market and we don’t want to be price leaders by pricing up anything. But at the same time, we have to be competitive, within a certain range, that’s how the — these are couple of considerations we do and we discuss within ALCO as a team and decide how we want to picture ourself to the customer.
Hardik Shah — Goldman Sachs — Analyst
Got it. Thank you for your time, sir, and congratulations again for a good quarter. Thank you, Hardik.
Operator
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Kunal Shah — ICICI Securities — Analyst
Hi, Srinivasan, thanks for taking the question. So firstly, again just coming on with respect to the RBI’s approval, so any indication with respect to HDB Financial? So, when we look at it in terms of the scheme of arrangement it says it is approved. So, would we hear further with respect to and HDB and HDFC Life or it’s more or less there within the arrangement scheme?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, good. Thank you. The other question, it was asked, HDFC Life, I didn’t address it, I will addressed it along with this. Kunal on the HDB, first, the RBI approval is a no objection to the scheme of amalgamation that has been filed. The scheme of amalgamation doesn’t have a role for HDB there. HDB is a subsidiary — existing subsidiary of the bank and continues to be there. And so the scheme of amalgamation does not have anything to do with HDB. And so that is, if anything, we need to do, it’s a separate conversation, it’s a separate process and so on. So, it’s not combined with the scheme. We filed the scheme and the scheme does not have anything to do with HDB.
HDFC Life is currently a subsidiary of HDFC Limited and it is envisaged at a merger, that it will be a subsidiary of the bank. There are two things in this. One, in — as a RBI regulation, a bank holding life insurance has to be 30% or below or 50% or above. Currently HDFC Life holding is about 47.8% or so. This is a — 2-plus percent — percentage point increase that is required. And that is part of another kind of regulatory approval that we have thought that we can go to 50% plus and whatever the regulator finally tells us, we will have to comply with that. So, that’s part of what we are waiting for and it’s a continuous dialog that happens to see how we can get to more than 50%, either we get or HDFC Limited will get to 50% plus before consummation of the merger transaction. So, that’s on HDFC Life.
Kunal Shah — ICICI Securities — Analyst
Sure. But there has no timelines in terms of where can we expect. So, the process is still on, the communication is still on?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Yes, that is correct. Yes, that is correct.
Kunal Shah — ICICI Securities — Analyst
Okay. Sure. And secondly, in terms of the overall PSL or maybe as we look at in terms of the buildup towards the merger. So, a couple of points. One is in terms of the branch expansion we have been highlighting that 1,500, 2,000-odd branches could be added. Maybe the Q1 was not maybe we have not seen that much of a branch addition. So, when do we expect it? Is it post like consummation of the merger do we see that the run rate or we will start preparing for it from this fiscal and it will be more back-ended?
And second-related question is on the PSL buildup. So, should we say that whatever PSL certificates were bought in FY ’22 and RIDF investments which have gone up from INR9,000 crores to INR45,000 crores, that was maybe with respect to the earlier requirement and we will start building up further to meet up with the HDFC Limited’s merger? How should one see that? Yeah.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Thank you again for that, branch buildup that you asked about, yes. This quarter the branch buildup was lower, 36 or so, but we have about 250 branches in various stages of getting to — getting to be implemented. We are not going to wait for anything, the branch buildup is an organic process. Irrespective of any kind of outcomes, branch buildup is the right thing to do for the bank from a growth point of view. That is way we have embarked on. And we see opportunities. Branch has got — we’ve talked about it again in the past, branch has got two aspects to it.
One, you have a branch, which develops the brand in the vicinity of where the branches and draws in customers through brand attraction. The second thing is branch is a congregation of our sales force. If you don’t have branch, you’re going to have a sales office, we can call it that, we’re going open X thousands of sales office. So, we rather than open X thousands of sales, because the kind of travel that sales Relationship Manager needs to do to in their outreach to meet a customer. On a prospective customer we want to keep it to 1 to 2 kilometers rather than to 4, 5 or 6 kilometers. It gets in better productivity and gets in better influence to consummate that transaction. That’s part of what we have envisaged and we’re doing. So, the branch buildup will happen, it’s not waiting for anything. It’s a question of a process to get that implemented. It’s in progress to happen. So, even in this financial year, you will see some substantial branch accretion that will happen.
The second aspect that you touched upon is the PSL. And you touched upon the RIDF on PSL. PSL, there are several strategies to grow PSL. Organic buildup of loans, PSL eligible loans is the best method to give. First, it gives fantastic returns. It gives great returns. Going through our credit filters because we have tried and tested credit filters, it gives you the best returns that they can and the returns far more than the average of the bank. So, we’re quite enthused to do PSL organically to the extent it comes through our credit filters.
In the past year to two years, when we have had muted retail to some extent, the PSL component is also lower, because we did not get that retail as much. But as we are now opening up more retail and going, you see that the PSL comes back organically. Still it’s only one of the component, because we don’t, we don’t leave other components on the table. We want all of that. For example, organic is one, where I think we have said that it is little more than, call it 30% to 35% or a little more than two-thirds to 70%, 75% we get through organic.
And then there are other tools that we always use and we want to continue to use them. One is the PSL certificates. We get that too, the other one is the RIDF is also something where it’s always a trade-off that is done. What is the organic that you can build within your credit filters and if you go outside of your filters, what sort of a credit cost are you going to end up and so thereby what returns. What is the cost of the PSLC, what is the cost of RIDF and so this is always an equation that happens almost in a quarter a few times that you balance this to see where there is the breakeven and which is the right way to go about. So, that is how decisions are done and we didn’t do retail, we have done more of the other things that will happen and we do more of retail there’ll be more of organic that comes. So, that’s how we think about the PSL.
Kunal Shah — ICICI Securities — Analyst
Sure. So, PSLC what we bought INR1,00,000 crore, maybe with HDFC, that there is a scope for this to go up substantially from here on, because INR80,000 crore has already gone up to INR1,00,000 crore last year And maybe with this requirement I think there will be more and more maybe purchase of PSLC which could happen?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
See purchase, again as I told you, these are the three, four elements that happens. PSLC, RIDF, organic PSL growth and we do participation certificates. So, several components are happening and we have to balance the cost versus peak returns that each one gives. So, there is no one particular target. If you ask me, do you know whether this INR1,00,000 crores is going to go to x or y, there is no predetermined formula that we operate. The formula is, which gives you the best returns. What is the breakeven or indifference point between various instruments. That is what drives the decision and that is, as you know, it is a dynamic position because the price in the market is dynamic, it’s not a fixed price and so that is how that is determined periodically. And then the outcomes is what you’re seeing.
Kunal Shah — ICICI Securities — Analyst
Sure, sure. Thanks. Thanks a lot.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Thank you, Kunal.
Operator
Thank you. The next question is from the line of Adarsh from CLSA. Please go ahead.
Adarsh Parasrampuria — CLSA — Analyst
Hi, Srini and team. Couple of questions, on the expenses side, obviously, you’ll have indicated investments in branches and how see people ramp up also in various [Indecipherable]. Any sense on that ramp up…
Operator
Sorry to interrupt you. Mr. Adarsh, the audio is breaking from your line sir. Please check.
Adarsh Parasrampuria — CLSA — Analyst
Let me try once, otherwise I will take it offline. So, just on the cost side, any sense, clearly you’re in investment mode in branches and employees. So, any path towards cost income over the next couple of years?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Good, good, Adarsh. Thank you for asking that one thing. While we normally this is from giving forward guidance on anything, but let me talk through. So, you will get an idea of what previously we had talked in our thought process. So, you will factor that. One, from a top line point of view, the growth is picking up. You’ve seen that over a period of time, the top line growth — the top line means, I meant the volume growth was anyway there, but the mix is also we would see this quarter and similarly last quarter, the mix is also changing to get that the top line revenue interest income, our interest income growth company also moving up, you’re seeing that come up. That gives you a little more kind of confidence and an opportunity to make the right kind of investments that you want because we want to feed that from a growth point of view. That’s one from a balancing point of view.
The second thing that also goes in our process, the second thing that also goes in our process — are you there?
Adarsh Parasrampuria — CLSA — Analyst
Yes, sir.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Are you there, Adarsh, we are not able to…
Adarsh Parasrampuria — CLSA — Analyst
Yes, yes, I am there. Please go ahead, sir.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, all right, because suddenly we lost the screen, control screen that’s why I asked. Okay. The second thing is, in terms of the credit situation. So, we’ve come up after a pandemic credit kind of a scenario. And as the credit gets benign, which is already, you’re seeing some benign credit environment and when I say credit benign means, I meant from a credit cost, benign, we have that is part of what you’ve seen us make those investments. Making investments in people when the credit costs have been below what we have seen historically, what we have seen before the COVID. We’ve taken the opportunity to make those investments in expenses, both people, technology as well as on branches. So, these are the two considerations that we have always given. How to to make those investments for the future by using the credit benign conditions and how to make people opportunity of the top line growth, so that you can balance it.
Now coming to the last aspect, which is the crux of what you asked, saying, what is the cost to income and how we should think about. If you go back to the pre-COVID, our cost to income has been 39.6%. The full year before the COVID, 39.6%, you can call it 39%, call it 40%. We’ve always said that as the retail picks up, retail is an upfront cost and the top line comes with a lag and comes over a two, three-year period. So, you put the cost in and it comes over two, three- year. That’s the nature of the retail. Once you want to grow retail that is, that is the way it happens. And you’re seeing that pick up and we have said that even through COVID period, when we, even when we wanted to spend, we did not have the opportunity to spend and we have been saying that we have been waiting for that opportunity to spend to get that retail backup and now that is chugging along. And so the cost to income on an overall basis, call it 40% — 40% or so, which is the pre-COVID.
Quarter to quarter variations will happen. And if you ask Sashi, I think has told in the past and certain other meetings that quarter-to-quarter variations can happen, because it’s a question of timing. But over a period of a year, two years if you see we can touch 40%, but over medium term, three to year years, this is something as a forward guidance normally, which we don’t do, but from a cost to income what we see as an opportunity is that it will get to the mid-30s, and which is what we said pre-COVID but this COVID has put a halt to that changing the composition of the product mix as well as our spend mix. And as we get back to normalization and execute, we should get back to that kind of trajectory over time.
Adarsh Parasrampuria — CLSA — Analyst
Second question relates to…
Operator
Sorry, to interrupt you Mr. Adarsh, the audio is breaking from your line.
Adarsh Parasrampuria — CLSA — Analyst
On asset quality ex agri, SME, it’s safe to say that things have trended absolutely in the right direction. What you have to risk to that right. So, what is the risk that credit cost income? As of now, it looks like it’s most of the segments, understood are some foreseeable future?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
You’re talking about the credit. You’re talking about the NPA.
Adarsh Parasrampuria — CLSA — Analyst
[Technical Issues]
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
[Technical Issues] it has been quite good if you at an aggregate level and that is, got a component of the business as usual, which is extremely benign because we originated with a very tight credit conditions and it has also got a component of the restructuring some of them that who could not — to whom we have given the opportunity to redeem themselves to come back to normal life. And some of them have taken that opportunity on the restructuring and used it to come back to normal life. Some of them who still struggle get into NPA but combined — on a combined basis we are seeing that it continues to get benign and better. Another one, two quarters, we should see it even more benign.
Adarsh Parasrampuria — CLSA — Analyst
So, this is useful and that’s it from my side. Thanks for answering questions.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Thank you.
Operator
The next question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Abhishek Murarka — HSBC — Analyst
Yeah, hi, good evening, Srini and team and congratulations for the quarter. So, I have two questions, one on NIM and one on OpEx. On NIM, when does the repo hike that happened in May-June, when does it fully translate into yields? Would it be by the end of August or September? And also, if you can share the EBLR repo, non-repo and fixed and floating breakup for the loan book, that would be useful?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Yeah. First on the NIM. The repricing starts, right, it started in May and there is a cycle, there’s at least a three-month cycle and some of them are six-month cycle in terms of what happens. So, that’s on the NIM. And so it’s not just that, it’s also got to do with — it is also got to do with the deposit costs. So, it’s just the repricing on the, on the repo or the T-Bill, just doesn’t do it, it also what happens on the cost of funds. But then we do, we do expect that the tailwind of the rates going up helps.
And if you think about the second aspect on the NIM that you asked in terms of the fixed and the variable, about 45% of the book is fixed and 55% is floating rate. And some of them call it — out of this 55%, 48%, which is, call it 27%, 28% of the total book is repo and quarter call it about 13%, 14% of the total bank book is T-Bill. So, that’s the kind of from a mix point of view, pricing point of view, you can think that’s how it moves one.
Abhishek Murarka — HSBC — Analyst
So, just extending that for the NIM outlook, of course, we thought that there would be a certain amount of uptake in term deposit rates as well. Just generally, would we still expect a retail and CRB proportions to rise in the loan mix and the expansion that you see in the yields, sort of outpacing the TD uptick? So do we expect these two things to continue for the next, let’s say, three to four quarters?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Yes. From a NIM point of view, it is also rightfully you’re focused on mix, because that is what makes it right, because individually things can go, if the mix don’t come, it takes a little more longer time. The mix as we speak now is still at 45%, 55% although, the retail grew at 5% in the wholesale, corporate was zero and CRB was 2.7% sequentially, the mix is more or less the same. One quarter, it doesn’t take it. It takes a few quarters for the mix. And last quarter we put out the chart in terms of how long it took for that mix to come, retail 55%, how long it took for the retail to come to 45% and then there is a path year by year it showed how long it took. So, while on the way up, it could be faster because the rate of growth on the retail and the demand in the macro environment we see on the retail is higher, so it could be faster. But yes, both the inherent demand we see in CRB and in retail is quite good and high.
And one other thing either I want to be cautious and tell you too, just because we think we see good demand if there is great demand in wholesale, we’re not going to turn down the wholesale loan just because the NIM has to come out. At the end of the day what matters in terms of this decisions is, does it give good return at the end of the day, ROA, ROE. Does it provide the right kind of return. If it does, it goes through. But from an inherent demand point — because I did mentioned this because March the same conversation happened and we saw the wholesale come in with a greater vigor for a growth in March quarter. And when it came, I was not able to go back and say by the way we talked about retail and CRB having a faster growth rate, inherent growth rate but wholesale has come, so, what should I say, decline wholesale. No as I said, we should go whatever is the demand, which is there, we like the customer, we like the credit, right pricing, gives you the returns, you should go. And so that is the kind of a decision making that happens. But inherently retail and CRB are having a good amount of demand.
Abhishek Murarka — HSBC — Analyst
Got it, got it. Thank you. And the other question is on OpEx. So, can you share some sort of targets on how much you want to hire for the rest of the year? And also, what is your tech spend this quarter as a percentage of overall OpEx? Where is that trending?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay. Yeah, two things, one in terms of the hiring, there is no predetermined — hiring depends on the productivity. We measure all products, all geographies, branches, non-branches, customer segments in terms of the productivity, which means the RM and the sales force to the — to the customer or to the sales unit, so it depends on the productivity that comes and continuously we drive the productivity up. So, we have a model, a best-in-class model and we have a best — and we periodically look at who and where it is suboptimal and we drive the productivity. So, that’s part of what we do.
And the people addition, we do as necessary to meet those opportunities, when the productivity is saturated, we do need to add to get the more volume. So, we’re not shy of adding because it brings in better volumes and better relationships. Then your other aspect in terms of the technology, yes, I think in the past, we have said that technology spend to total expenses, 8%, 9% or so, that’s stable over a longer period of time. That’s kind of range in which it operates. So, quarter-to-quarter, it can move around, but broadly that’s where it i.
Abhishek Murarka — HSBC — Analyst
So, it would be in that 8% to 9% range this quarter as well?
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Quarter to quarter, it can be different, but broadly, that’s where it goes, yes.
Abhishek Murarka — HSBC — Analyst
Okay. Okay. Got it, Srini. Thank you. That was useful and all the best for the following quarters.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Thank you, Abhishek.
Operator
Thank you. Ladies and gentlemen, this would be the last question for the day, given the time. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments.
Srinivasan Vaidyanathan — Chief Financial Officer / Group Head Finance
Okay, thank you. Thank you, Faizen and thank you to all the participants who dialed-in today. If you still have more questions or need any clarity — clarification, feel free to get in touch with our Investor Relations team, they’ll be happy to engage. Thank you. With that, we’ll sign-off for the day. Bye-bye.
Operator
Thank you. Ladies and gentlemen, on behalf of HDFC Bank Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.
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